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May 2019   Volume 45, Number 5      
 

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Bombshell Lawsuit Alleges Top Real Estate Companies Violated Sherman Antitrust Act

A recently filed class-action lawsuit accuses major U.S. real estate firms of violating antitrust laws. The suit (Moerhl v. National Association of Realtors (NAR)) was filed in federal district court in Chicago and makes the claim that the defendants in the suit colluded to require home sellers to pay inflated amounts to the brokers representing the buyers of their homes.

The lawsuit focuses on a rule that was allegedly imposed by NAR which pertains to multiple listing services (MLS). The plaintiff in the suit argues that the MLSs are how the majority of homes in the U.S. are sold and that these MLSs are mostly controlled by local NAR associations.

When a seller’s property is listed to the MLS, the rule requires sellers to not only pay the agent responsible for listing the property, but also pay a non-negotiable offer of compensation to the buyer’s representative. The result is that sellers end up paying a cost that would otherwise be paid by the buyer in a competitive market.

The class-action lawsuit was brought by plaintiff, Christopher Moehrl, a home seller in Minnesota. He sold his Minnesota property and paid a total broker commission of 6 percent with the buyer’s broker receiving 2.7 percent of the commission.

The class-action lawsuit includes people who used one of the 20 largest MLSs over the course of five years since March 6, 2015 across a number of major cities, including Dallas, Texas, Washington, D.C., Cleveland, Ohio, and Denver, Colo.

The plaintiff in the suit argues that if the rule did not exist then the buyer brokers’ commissions would be negotiated, resulting in a lower cost. The suit alleges the rule results in agents steering buyers toward higher-priced listings that are subject to the requirement.

“In a competitive market, the seller would pay nothing to the buyer broker, who would be paid instead by the buyer, and the commission paid by the seller would be set at a level to compensate the seller broker only,” according to the suit.

In the U.S., the total compensation that brokers receive is roughly 6 percent, with half of that awarded to the buyer’s broker. The plaintiff alleges that in international markets, homebuyers pay their brokers less than half the compensation rates paid by homebuyers in the U.S.

The plaintiff is being represented by Benjamin D. Brown, an attorney and a partner at Cohen Milstein, Washington, D.C. Brown is the co-chair of the firm’s antitrust practice group. Brown says the lawsuit could help save American home sellers a lot of money when they sell their homes.

However, analysts believe the lawsuit poses a serious threat to the real estate industry given there is no potential for a settlement. In addition, the lawyers on the case are from some of the most successful class-action plaintiff’s law firms in the country. Cohen Milstein previously beat Apple in an electronic books antitrust lawsuit and has the funds to potentially continue to call expert witnesses and keep the case going for years.

In response to the motion, Mantill Williams, vice president of communications at NAR says the complaint “is baseless and contains an abundance of false claims.”

“The U.S. Courts have routinely found that Multiple Listing Services are pro-competitive and benefit consumers by creating great efficiencies in the home-buying and selling process. NAR looks forward to obtaining a similar precedent regarding this filing,” said Williams.

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In this issue:

Bombshell Lawsuit Alleges Top Real Estate Companies Violated Sherman Antitrust Act

Breakups Force Millennials to Return Home, Says Homes.com Study

High-Priced Condos Sell at a Loss More Often than Non-Luxury Units

Redfin Study finds Homes with Pools Sell for More Money

Home Sellers Not Comfortable with Real Estate Agents, Study Says

LendingTree Study Examines How Housing Prices Have Recovered Since 2009

Rising Housing Costs Causing Some Married Couples to Take on Roommates

New Study Analyzes Salary Needed to Afford Housing in Top U.S. Metros

Rising Seas Eliminate $15.8 Billion in East Coast Home Values

How to Negotiate Like the Pros: 3 Expert Tips to Help You Close Real Estate Deals

 


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